Role and duties of a company director

A company director is appointed to a limited company to manage day-to-day business activities and finances, ensuring all statutory filing obligations are met and that the company is run in accordance with the Companies Act 2006, the articles of association, and the shareholders’ agreement (if one exists).

Directors must act lawfully and honestly, making decisions for the benefit of the company and its members (shareholders or guarantors). Using their skills, experience, and judgment, a company director must try to make the business a success by promoting and achieving its principal objectives.

The statutory duties of a company director

The duties and responsibilities of a company director are set out in the Companies Act 2006, the articles of association, the shareholders’ agreement, and the service contract between the director and the firm. The Companies Act 2006 outlines the statutory regime for directors’ duties, which consists of seven principal requirements:

• To act within the powers granted to them in the articles of association
• To promote the success of the business
• To exercise independent judgement in all decision-making
• To use reasonable care, skill, and diligence at all times
• To avoid or declare any conflict of interest
• To avoid the acceptance of benefits from third parties or using their position to make private profits
• To declare an interest in a proposed transaction or arrangement with the company before it enters into such a transaction

The management duties of a company director

A company’s articles of association provide supplementary information about directors’ rights, duties, and powers, as authorised by shareholders in accordance with the provisions of the Companies Act 2006. These general management duties may include:

• Making decisions for the benefit of the company and its owners, and considering the interests of creditors in all decision-making
• Maintaining the company’s registered details and reporting changes to Companies House and HMRC
• Maintaining statutory company records and making them available for inspection
• Keeping accurate accounting records
• Monitoring the financial position of the company
• Taking all reasonable steps to minimise losses if the company is facing financial difficulty
• Filing annual accounts, an annual confirmation statement (previously the annual return), and Company Tax Returns by the given deadlines
• Paying Corporation Tax and any other tax liabilities by the given deadlines
• Arranging general meetings and board meetings
• Arranging and distributing minutes of meetings
• Filing copies of resolutions with Companies House
• Appointing solicitors, accountants, and auditors, where required
• Maintaining company stationery
• Providing members with copies of annual accounts
• Issuing and transferring shares
• Complying with employment law if the company has employees
• Responsible for the health and safety of all employees
• Appointing a company secretary, if required

How many directors are required when forming a limited company?

To form a limited company, you need a minimum of one director. There is no statutory limit to the number of directors a company appoints during or after incorporation, but there must always be at least one natural (human) director.

One person can be the sole director and shareholder of a company. Alternatively, a company can have multiple directors and shareholders during its incorporation and any time thereafter.

Who can and cannot be a company director?

A company director can be a person or corporate entity (e.g. another company). Individuals must be at least 16 years old, but you cannot appoint any person who is:

• an undischarged bankrupt
• currently banned under the terms of a director disqualification order, or
• the company auditor

It is common for shareholders to also be directors. If you do appoint a corporate body as a director, the company must also have a minimum of one natural director at all times.

Is there a minimum age requirement to be a company director?

A minimum age requirement of 16 was introduced in October 2008 under the Companies Act 2006.

Can a company director also be a shareholder?

UK company law permits private limited companies to be registered with only one director, who may also be a shareholder. It is, therefore, possible to set up and run a company on your own as the only shareholder and director.

What is the difference between a company director and a shareholder?

A shareholder owns all or part of a company. Directors are appointed by shareholders to manage all operational and financial aspects associated with running a company.

Can a company director also be a company secretary?

Yes, a company director can also be the company secretary.

What is the difference between a company director and a company secretary?

The burden of responsibility placed upon a company director is quite significant. For this reason, many directors appoint a company secretary to assist them with their statutory duties, which helps to reduce their workload to a manageable level.

Almost all directors’ duties can be delegated to a company secretary. However, legal liability for these statutory duties ultimately falls upon directors.

What is a corporate director?

A corporate director is a term used to describe a company, firm, or any other kind of corporate body that is appointed as the director of another company. A private company can appoint as many corporate directors as it wishes during or after company formation, provided there is always at least one appointed human director.

There are many advantages to appointing corporate directors, especially when a company is newly established. The expertise, support, and guidance of a well-known corporation can be extremely beneficial to a company that is just starting out, and it can make a relatively unknown business more appealing and credible to consumers, suppliers, investors, and lenders.

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The role of a corporate director is exactly the same as that of a natural company director, but an authorised person must be nominated to act on behalf of the corporate director. This role will usually be assumed by a director or secretary of the corporate body.

It should be noted that new restrictions on the use of corporate directors were introduced in the Economic Crime and Corporate Transparency Act 2023. The legislation means that companies will only be permitted to appoint UK corporate entities with ‘legal personality’ as corporate directors.

The date of implementation has yet to be announced. However, once the new rules come into force, existing companies with corporate directors will have 12 months to comply.

Are directors’ details placed on public record?

Yes, the following directors’ details are placed on public record by Companies House:

Natural director

• Title, full forename(s), and surname, including any former name(s)
• Service address (residential or other)
• Nationality
• Month and year of birth
• Occupation
• Appointment date

Corporate director

• Date of appointment
• Registered name and number of corporate director
• Registered office or principal address of the corporate director
• Registration place of corporate director
• Country of incorporation (non-UK Companies)
• Registration number (non-UK Companies)
• Legal Form (non-UK and non-EEA companies)
• Governing law (non-UK and non-EEA companies)

Anyone can view this information for free on the Companies House register, including other businesses and members of the public.